Consumers hoping for significant savings from a class-action settlement over agent commissions by the National Association of Realtors (NAR) may face disappointment, as experts remain unsure about the true benefits, especially for first-time homebuyers. The agreement, which drew praise from President Joe Biden and former Treasury Secretary Larry Summers, is seen as a potential step towards breaking the "Realtor cartel" and saving households billions of dollars over time. However, the immediate impact on home prices and affordability remains unclear.

The settlement arrives at a critical juncture for the housing market, as higher mortgage rates led to sales dropping to their lowest level in nearly thirty years. This poses a particular challenge for first-time buyers seeking to enter one of the most unaffordable markets in history. While the settlement theoretically has the potential to lower home prices by reducing commissions, experts caution that this outcome is not guaranteed, especially in the short term.

According to Steve Murray, senior adviser to data provider and consultant Real Trends, sellers are unlikely to lower prices simply because their transaction costs decrease. The NAR supported this notion, stating in a response to President Biden's remarks that commissions were already negotiable and would continue to be. The extent to which the changes will ripple out and impact the market remains a subject of heated debate, as the outcomes are largely uncertain.

The longstanding system of compensating US real estate agents has faced criticism for inflating costs and creating unfavorable incentives. In October, a Missouri jury ruled that the NAR and others colluded to keep prices high, resulting in a $1.8 billion verdict. As part of the settlement reached earlier this month, the NAR will pay sellers approximately $418 million and modify certain rules. Notably, sellers will be prohibited from including compensation details on the multiple-listing service, a vital tool for marketing homes.

This change, set to take effect in the summer pending court approval, could potentially encourage sellers to negotiate lower commissions. However, there are concerns within the industry that agents may find alternative means, such as brokerage websites, to discuss commission splits. Moody's Analytics Chief Economist Mark Zandi expects commissions to gradually decrease to around 4% to 5% over time, with variations based on home price and geography. Zandi believes that while this is a significant change, most of the benefit will likely be captured by the seller, resulting in a minimal impact on home prices.

The settlement has sparked discussions among academics at the American Real Estate Society's annual gathering in Orlando. Ken H. Johnson, a real estate professor at Florida Atlantic University, highlighted the complexity of determining who exactly benefits from lower commissions - buyers or sellers. Johnson suggests that in theory, sellers should pass on some savings to buyers, but in a seller's market, this may not be the case. Additionally, Johnson believes that the settlement may lead more first-time buyers, who may lack the upfront cash to pay brokers, to venture into the market independently. However, this could potentially result in conflicts of interest as listing agents represent both buyers and sellers.

The future of the real estate industry also faces uncertainty as the Department of Justice targets commission sharing, advocating for a complete decoupling of compensation between sellers' and buyers' representatives. Whether the NAR settlement will satisfy regulators remains to be seen.

Agents are already adapting to the proposed settlement's new rules. For instance, broker Keith Burkhardt in New York is developing a flat-rate service to assist with property valuation and navigating co-op and condo boards, estimating charges for buyers between $5,000 and $7,500. Real estate agents like Iain Phillips in California will also need to emphasize the value they bring to deals.

While the settlement is a significant development, experts caution against expecting immediate and seismic shifts in the industry. The true impact remains uncertain, and interpretations of the ruling vary among industry professionals, reflecting the prevailing fear and uncertainty that accompany such changes.